Against the yen JPY, the U.S. dollar was down 0.2% at 154.105 yen and on track for its second consecutive week of declines, while the euro EURJPY slipped 0.2% to 178.99 yen after the European Central Bank hiked interest rates on Thursday for the second time this year.
The Japanese currency regained some strength after data released on Friday showed wholesale inflation rose 7.6% in August from a year earlier, bolstering the case for a rate hike this month.
The Bank of Japan is set to raise interest rates next week, most likely by 25 basis points, and may signal faster future tightening if price pressures heighten risks of an inflation overshoot, four sources familiar with its thinking told Reuters.
The kiwi dollar NZD= was up 0.5% at $0.5827, retracing a selloff on Thursday that has put the currency on track for its third week of declines. New Zealand's 10-year government bond yields NZ10YT=RR rose by 15.5 basis points to 5.06% on Friday, extending the biggest two-day jump in borrowing costs since last year's 'Liberation Day' selloff.
"New Zealand seems to have been hit harder than most in the latest leg of the bond market sell-off," said Thomas Mathews, head of markets for Asia Pacific at Capital Economics in Wellington.
The Australian dollar AUD= was up 0.2% at $0.7167.
Both the euro EUR= and the British pound GBP= were level against the dollar at $1.1609 and $1.3503, respectively.
Markets are awaiting the release of U.S. CPI later on Friday, one of the last major economic data points released before the Federal Reserve meets next week.
Fed funds futures are pricing an implied 71.1% probability of a 25-basis-point hike at the U.S. central bank's next two-day meeting ending on September 16, compared with a 61.2% chance in the previous trading session, according to the CME Group's FedWatch tool.
Fixed-income markets remained uneasy after the U.S. Treasury Department tripled the size of its long-dated bond repurchase, with a gauge of bond volatility .MOVE rising to its highest level in a month. The yield on U.S. 10-year government bonds US10YT=TWEB was up 1.5 basis points at 4.957%.
"10-year U.S. Treasury yields are within striking distance of 5%, as the markets have reassessed the Fed's path higher while term premium is appropriately hovering near pre-GFC levels," Barclays analysts wrote. "We remain of the view that bonds are not cheap yet and catalysts for a rally do not appear imminent."
In cryptocurrencies, bitcoin BTC= was down 0.2% at $77,094.41 while ether was 0.1% lower at $2,457.96.
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